Home loans are surely the biggest financial commitments for borrowers in their lifetime, as they involve a considerably high amount and long repayment periods of usually 15 to 30 years. Home loan EMIs affect the monthly expenditures to a great extent and are a big responsibility and obligation to be taken care of. Thus, ICICI Home Loan borrowers generally keep looking for ways to reduce this financial burden.
Here are a few important tips for managing your home loan repayment and reducing your interest outflow efficiently.
Opt for balance transfer- Under this option, the entire outstanding balance of your ICICI Home Loan can be transferred to another lender who provides better terms and conditions along with a lower interest rate. This option can opt when your existing lender doesn’t accept your request to lower the interest rate on your loan or improve the terms and conditions.
Existing borrowers from HFCs and NBFCs can opt for this option to avail the benefits of MCLR-based rates by transferring their loans to banks.
Switch to external benchmark linked loans if you want- After RBI mandated banks to give new home loans (of floating rate) by linking them to an external benchmark, existing home loan borrowers have the option to switch from old base rate or MCLR rate to these regimes. As per your ICICI Home Loan Eligibility, it’s best to enquire with your present home loan lender to know more. Also, remember to enquire not just about the availability of this switch option and process, but also the applicable charges, if any.
Reset your loan to a lower rate (for NBFCs and HFCs) – NBFCs and HFCs are not included under the MCLR system of RBI, and they lend on the basis of PLR (Prime lending rate). But the existing borrowers of these can reduce their interest payout by resetting their home loan’s rate by paying a conversion fee which is a small percentage of outstanding loan amounts. It varies among various lenders/banks. Opt for this option after proper calculation of your savings and only if the amount you save by resetting your ICICI Home Loan comes out to be significantly higher after the inclusion of the conversion-related charges.
Make partial or full prepayments – Borrowers can prepay the full or part of the outstanding home loan amount whenever they have surplus funds or by way of bonuses or maturity of an investment plan etc. Although, as per RBI guidelines, lenders cannot charge you for prepaying in case of floating interest rates, they may charge a certain percentage in case of fixed home loan rates. While prepaying, make sure the prepayment charges aren’t too high.
Ensure that the prepayment decision doesn’t affect your emergency funds, long term financial goals, and ICICI Home Loan Eligibility . If the returns from your existing investments, such as fixed deposits, aren’t tied to a particular goal, then you may redeem them to prepay your home loan. Also, do not divert your contributions earmarked for specific long term goals in order to prepay your loans.
